Cartel Size and Collusive Stability with Non-Capitalistic Players

Abstract

A well established belief both in the game-theoretic IO and in policy debates is that market concentration facilitates collusion. We show that this piece of conventional wisdom relies upon the assumption of profit-seeking behaviour, for it may be reversed when firms pursue other plausible goals. To illustrate our intuition, we investigate the incentives to tacit collusion in an industry formed by labour-managed (LM) enterprises. We characterise the perfect equilibrium of a supergame in which LM firms play an infinitely repeated Cournot game under grim trigger strategies. We show that the critical threshold of the discount factor above which collusion is stable (i) is lower in the LM industry than in the capitalistic one; (ii) monotonically decreases with the number of firms.